Foreclosure Wave to Continue

Irvine, Calif.-based John Burns Real Estate Consulting Inc. has released a study positing that some 5 million houses and condos already delinquent will go through foreclosure or short sales in the next few years. That's most of the 7.7 million U.S. households currently delinquent.

February 16, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user futureatlas.com

Irvine, Calif.-based John Burns Real Estate Consulting Inc. has released a study positing that some 5 million houses and condos already delinquent will go through foreclosure or short sales in the next few years. That’s most of the 7.7 million U.S. households currently delinquent.

If it comes to pass, will that stark fact continue to drive down home prices? Maybe not. Buyers have been snapping up foreclosed properties at a fairly brisk pace lately, taking advantage of post-bubble prices and low interest rates. A sustained recovery, even a modest one, will probably keep a steady flow of buyers in the market for foreclosed properties, which might in turn keep something of a floor beneath prices.

Still, not everywhere will see such a floor. The foreclosed properties will add about 10 months’ worth of inventory to the U.S. housing market, according to the consultancy. But that’s just a national average. Places such as Orlando and Stockton, Calif., will have 27 months’ worth — more than two years — of extra inventory to deal with. Miami will have two years’ worth and Las Vegas 18 months.

Countrywide Pays Florida Settlement

A 2008 lawsuit by the State of Florida against Countrywide Financial Corp. will come to fruition for some in that state this week, as settlement checks worth about $6,000 each are being sent to about 2,700 Florida homeowners (and former homeowners). The entire Florida settlement totals $16.9 million.

In the suit, Florida Attorney General Bill McCollum asserted that back in the freewheeling, get-a-mortgage-if-you-can-fog-a-mirror days of the mid-2000s, Countrywide put borrowers into mortgages they couldn’t afford and possibly misled them about the bear-trap nature of the interest rates and penalties associated with their loans.

The payments are part of a larger pattern of settlements that Countrywide, now part of Bank of America, has agreed to make under legal pressure from the attorneys general of Florida and 10 other states. All together, the company agreed to a total of $8.4 billion in mortgage relief, including loan modifications.

Volcker Talks, Congress Yawns

Financial euthanasia might be the next big thing if former Fed chairman and current Obama administration advisor Paul Volcker has his way. Speaking on CNN over the weekend, Volcker said that “if a big non-bank institution gets in trouble and threatens the whole system, there ought to be some authority that can step in, take over that organization and liquidate it or merge it–not save it.”

That notion was only the latest reform-minded statement from the head of the president’s Economic Recovery Advisory Board. Earlier this month, Volcker said in testimony before the Senate Banking Committee that a bank “trading for its own account… will almost inevitably find itself, consciously or inadvertently, acting at cross purposes to the interests of an unrelated commercial customer of a bank.”

The so-called Volcker Rule would ban depository institutions from proprietary trading. Volcker has been talking about the idea a lot in recent weeks, but it seems unlikely to be translated into any kind of new regulation by a distinctly non-reform-minded Congress.

The markets were closed on Monday for the Presidents Day holiday.